Manufacturer rebates, such as mail-in rebates, are a popular way for manufacturers to offer price reductions directly to consumers. For example, a report by Cox Direct Inc., a direct-marketing company based in Largo, Fla., indicates that 76% of surveyed packaged-goods companies used money-back offers in 1996, which has increased from 66% in 1995. In addition, NCH NuWorld Marketing Ltd., a large U.S.-based coupon processor, indicates that the use of traditional cents-off coupons is decreasing, while the manufacturer rebate business is increasing, especially for higher-priced items.
Distributor or manufacturer rebates overcome some disadvantages associated with traditional manufacturer price reductions. With traditional manufacturer price reductions, retailers may elect to leave shelf prices unchanged and keep the difference between the shelf price and the manufacturer- or distributor-defined price. This eliminates the promotional value of the price cuts on the part of the manufacturer or distributor, because consumers cannot realize those discounts. Manufacturers may instead choose to utilize rebates as a means of offering price reductions directly to consumers. This is preferred because it ensures that the consumers are receiving the discount that the manufacturer wants them to receive.
Despite the rise in rebates, and their advantages over traditional price cuts, there are many deficiencies with manufacturer rebate programs. Redeeming mail-in rebates is time consuming, which often deters consumers from purchasing products with attached rebates, regardless of potential savings. Also, many rebates have associated expiration dates, which means that the rebate expires on a specific date regardless of when the product was purchased. Many consumers miss the materials required by the manufacturer to be eligible for the rebate and are thus unable to redeem the rebate. Some consumers simply do not attempt to redeem mail-in rebates because they do not trust that the rebate will actually be mailed to them.
Rebates can also be problematic for manufacturers, in that any mishandling of rebate redemption can generate ill will toward the manufacturer. Telephone-based help lines may be needed to deal with problems associated with rebate redemption, which means that a manufacturer must employ service representatives. As processing costs for thousands of mail-in rebates can be expensive, many manufacturers hire outside firms to handle rebate redemptions. Fraud is a concern for a manufacturer, especially where outside firms are retained to process the manufacturer rebates. As more entities participate in the processing of the rebates, the potential for fraud and mishandling can increase. Fraud can cost a manufacturer large amounts of money if their redemption procedures are not followed and their rebate coupons are mishandled. Thus, there exists a need for an improved rebate redemption system that will encourage consumers to purchase products with associated rebates, while minimizing rebate processing costs for a In manufacturer.